There are several Personal Loan myths that prevent people from applying for this loan. Find out the most common ones in this article.
Whenever we need emergency funds, the first thing that comes to mind is a Personal Loan. It is a great way to fund any expenses. The loan is slightly different from Home Loans or Auto Loans because a Personal Loan can be used for any purpose. There are no restrictions associated with it. A significant benefit associated with Personal Loans is that they are collateral-free. You can apply for a loan even when you do not own any assets.
Despite its many attributes, many people tend to shy away from applying for personal loans due to several myths surrounding this financial facility. In this article, we shall attempt to bust some personal loan misconceptions.
Since Personal Loans can be easily availed, there is some apprehension from many potential borrowers. There are several myths associated with a Personal Loan. So let us debunk the many Personal loan misconceptions.
This is one of the top Personal Loan myths that often comes to the mind of a borrower. Many borrowers assume that they are ineligible for the loan due to their low credit scores. However, this is not the case. Your credit score is an essential factor, and it is taken into account when evaluating your eligibility, but many other factors take precedence. Besides the credit score, the lender will take into account your income and repayment capacity. You may be eligible for a loan even with a low credit score, but you may have to pay a higher interest rate.
Another common Personal Loan misconception is that you cannot apply for a Personal Loan when you already have a loan outstanding. It is not valid, and the same criteria will be used when processing the loan, as it was for the first time. So long as you are paying your existing loan EMIs on time, there should be no problem. The loan application will be accepted or rejected based on your ability to repay and not on the number of outstanding loans you have.
Another popular Personal Loan myth is that you cannot prepay your loan before the scheduled tenure. You can repay the loan before the end of the term and foreclose it if you wish to do so. However, you may have to pay a prepayment fee, a flat fee or a percentage. Also, the fee is waived off after you complete a specific tenure. E.g. you may have to pay a prepayment fee if you choose to foreclose your loan within one year, but it could be waived off after paying EMIs for a year.
A personal loan myth that prevents many people from applying is the supposedly high-interest rates. But it is not always the case. Financial institutions set Personal Loan interest rates based on your credit score and repayment ability. If you have a poor credit score and low repayment capacity, you will have to pay a higher interest rate, and if you have a strong credit score and repayment history, you will enjoy a low-interest rate.
The list of personal loan myths also includes the limited eligibility criteria. There is a common belief amongst many that only salaried professionals are eligible for the loan. However, this is not true. A Personal Loan is available for all individuals who have a constant source of income. Even self-employed people can apply for a loan, and the loan amount will depend on their credit history and repayment capacity.
The process of the Personal Loan application is quick and hassle-free. It is no longer an arduous process, and you can apply for a Personal Loan online. Moreover, loans are processed almost instantly, with minimal documentation, and sums are disbursed within a few hours. If you still have any Personal Loan misconceptions, you can always reach out to your bank to get them sorted.
Download the digibank mobile app on your smartphone. Launch the app and click on the "Get Personal Loan" link on the login page.